So You Want To Fix The Housing Crisis | Hacker News Reader

So You Want To Fix The Housing Crisis

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58 pointsmdev77 comments

15 of the 30 cities with the highest rents in the US are all in the San Francisco Bay Area.

Housing is one of those issues where the political paradigm is so complex, it's impenetrable. Everyone has their own opinions about what the main engine is and it's hard to get anywhere.

Here's my own perspective, it has nothing to do with any city in particular.

(A) Housing is not a free market. Supply and demand exist, but that is not enough to make a market free. It's never a free market because decisions are (necessarily or not) always made at the political level. This covers things from planning, interest rate policies, bankruptcy laws tenancy laws, and even things like bank bailouts. Housing is unavoidably political.

(B) There is a conflict of interests between home owners and renters. One wants high prices, low availability, the other wants low prices.

(C) There are lots of interests that fall on the rising prices side. Rising prices make it easier to make money on loans, building, etc. They make it easier to raise tax revenue that funds public services that all sorts of parties have an interest in.

(D) Owner-occupiers should be neutral. They own one house, regardless of market price. But because of financing, and a lot of incorrect but persistent psychology about personal wealth they usually feel firmly on the high prices side. No one wants their house to lose value.

(E) Nominal increase in property value is inflation. Inflation has real impact on the "real" economy (as economists use the term). This has to do with the value of outstanding loans and annuities.

We are looking at problems that are mostly political and cultural as if they are economic. Ultimately a lot of the things that drive demand for houses are the same as the things that drive demand for universities. Demand for elite universities is not about competing for education as a scarce resource. Same with housing. It's not about competition and scarcity . It's about culture and politics.

"Owner-occupiers should be neutral"

Except for people who want their home to provide a cash inheritance for their children when they die, or who want to sell their home and downsize while still alive to raise cash. That's not an incorrect psychology.

Those are edge cases and they can go both ways. Inheritance for their children to buy a house with? Even with inheritance, it can be zero sum. You inherit a house which you use to clear a mortgage or buy your own house. You still have one house. Unless the houses multiply there is nor real addition of wealth.

Some people do accumulate capital in their houses and downsize. But even in cases where it happens, they might have been better of with cheaper housing costs all their lives enabling savings amounting to more capital at retirement.

Homeowners might end up on either side of this equation. Rapid growth periods place earlier buyers in a better relative place to later buyers. But I think the upside is over valued by home owners while the downside is undervalued. Much of the upside is in fact access to capital.

It's interesting how foreign the idea that lower prices make us wealthier is when it comes to housing.

Edge cases?

That's the entire middle class you just called an edge case. You might be able to do the math, they can't. All they know is that they bought for £150k, sold for £175k, woohoo, they made £25k. Doesn't matter their new house was even more expensive.

Also the baby boomers cashed out big on their houses before the recession, so their children irrationally believe that's what's going to happen to them.

All your other (pretty good) points now look slightly ridiculous by association because you're so out of touch with normal people.

I meant that instances where homeowners really win or lose significantly from rising house prices are edge cases. They exist and are common. But, they go both ways.

I believe that the mentality you are describing is generated by the system moreso than it generates the system. If people expected their £150k house in Norwich to be worth £125k in 10 years, the whole psychology would change. people would see houses as what they are. Things that cost money. Things you live in.

*I also think that all the mortgage encouragement is counterproductive. If 10 year loans were the norm, house prices would be lower. Own-to-let would require higher returns (7-9%) over a lower purchase cost, but housing as an overall cost to the people in the country would be lower.

Yes, they would have been better off with cheaper housing costs all their lives, but we are talking about people who have already purchased. If housing prices dropped to one half their current value, a large fraction of the owner-occupiers in this country would be bankrupt.

They would owe more than they own. But if you buy a house with a mortgage and the price goes down, you still owe exactly the same amount of money. Same monthly payments. Same house. Nothing changes unless you sell it.. and don't immediately buy another.

In that case, the owner would have every incentive to "strategically default"

"If you need an example of how intense this is, over the summer, 71,421 people, or 8 percent of San Franciscans, decided that we should all vote on every single project over the existing height limits on the waterfront by passing a ballot initiative. It was funded primarily by a single wealthy couple that didn’t want to lose their views, and they put it through in one of the lowest turnout elections in city history."

What she doesn't say, really matters: that initiative was primarily about stopping a massive government handout to the multimillionaire owners of a professional basketball team, which would essentially give away a choice bit of public property in order to build an arena in a part of town where no arena should exist. The ballot initiative was put in place to make it much more difficult for that land-grab to go through.

This stuff isn't just about people being ridiculous NIMBYs. Honestly, I think it's more ridiculous to look at San Francisco and claim that the problem is that we aren't building enough, when you can walk up to just about any live/work space in SOMA (i.e. the new construction), and see that the tenant list is mostly startups. That's what happens when you let developers build whatever they want -- they build for the most lucrative allowed use of the land. And that usually isn't residential construction.

Is there NIMBYism in the bay area? Absolutely. But the biggest problem, by far, is that there's a massive technology bubble inflating everything from real estate to salaries in a very tiny slice of livable property. The price increases are being driven by greed and speculation as much as any sort of sustainable demand.

> I think it's more ridiculous to look at San Francisco and claim that the problem is that we aren't building enough...

I have no understanding of this (common) sentiment. We are adding jobs at 10x the rate we are building new housing. There are only two variables in the equation. You can not will the relationship between supply and demand out of existence.

> That's what happens when you let developers build whatever they want

No, this is exactly what happens when you don't let developers build to accommodate the market. According to the article, a 640 sq ft single unit costs 500K$ to build [1]. The worse case scenario is that after spending hundreds of thousands of dollars, the project is delayed by any one of dozens of parties that can block development for years.

In summary, of the 1/10th of the required housing we do build, it is quite literally __impossible__ for any of it to be affordable and turn a profit. Any laws that make building more onerous will only exacerbate the problem.

1. http://www.spur.org/publications/article/2014-02-11/real-cos...

The very first chart in that SPUR publication shows you that the vast majority of development costs are in land and construction. If you do the math, the regulatory costs in that chart amount to 16% of the total. This is consistent with what I've read from architects and urban planners -- regulatory expense in SF is <= 20% of building costs. And most of that is a set-aside for low-income housing.

In other words, regulation is a red herring. Even if you eliminated all regulations, the cost of building a housing unit here would be beyond the reach of most people. Land and construction, in a tiny, dense city where everyone wants to live in the same three neighborhoods: it's expensive because it's expensive.

Regulator expenses in building houses may only be 20-40% of the cost, but this isn't true of the price! In healthy markets, houses are priced close to the cost of construction. In SF (in the 90s), house prices were over 140% the cost of construction [1]. I'd expect the difference to be even larger today because regulations are more ridiculous.

I agree, if we eliminated all regulations, the cost of building a house would decrease perhaps 40% at the most. I'd expect some of this savings to be passed on to tenants. If this were the only consideration, housing would still be unaffordable. But, without regulation, we'd also see at least 10x increase in new construction. Housing would be built until it were no longer profitable. IE, the price of apartments would approach the cost of building them (from astronomical to merely expensive).

The Bay simultaneously welcomes any and all new jobs while it refuses to build housing concomitant to the demand. It will never be cheap to live here, but maybe we could drop the distinction as the most expensive city in the country.

1. http://www.researchgate.net/publication/228180251_Zoning%27s...

> But, without regulation, we'd also see at least 10x increase in new construction

This is theory. Reality would be very different.

What like 9x increase? Clearly more housing would be built if were simply allowed. Developers are building to the maximum units/sqft permitted on every project.

I would suspect more like 1.1-1.2x.

Essentially, for most homeowners their home is their biggest investment and they should be expected to act in their economic self-interest to preserve and increase the value of that investment, and thus we can expect them to do what they can to prevent more homes from being built.

I've been interested in a possible analysis for a while (maybe I should finally dig in and do it myself). My hypothesis is that San Francisco isn't as nimby-istic as it appears, that this is an artifact of a political and geographical oddity. San Francisco is a 7x7 square mile city and county that is already reasonably dense (on average - parts are extremely dense, the only place outside NYC with 100k+/sq mi density, whereas other neighborhoods 4 miles away are leafy suburbs). It's also a peninsula, and much of the area to the south is designated open space.

Here's the thing - I'd be interested in analyzing other metro regions where a long standing, dense urban core isn't its own city and county, and see what percentage of growth happens within it or outside it. In other words, let's look at sub-regions with existing stable population density of above (say, 20,000 inhabitants per square mile for the last 50+ years) and see how much construction has occurred within them.

For instance, does Atlanta have a small, historic downtown with an existing housing base that has been relatively dense and stable for 50 years? Has the growth in Atlanta come from tearing down 80 year old buildings in neighborhoods with 20k/sq mile populations dating back a while, or has it been in the suburbs and exurbs that count as "Atlanta" but wouldn't count as "San Francisco"?

I don't know the answer to this question, but I think it's an important one to answer before concluding that SF is uniquely "nimby-istic" toward housing in some cultural or political way. You can probably tell where I'm leaning with this, though - that the NIMBY attitude, to the extent that it exists, has more to do with low density areas like mountain view resisting new housing than high density areas like much of SF.

If San Francisco were more NIMBY-tastic than its sister California coastal cities of Los Angeles and San Diego, then one might expect its housing prices to pull away from those two.

Instead, they seem to move in lock-step: https://pbs.twimg.com/media/BolI6BiIMAAgpWT.png

Prices in SF, LA, SD all move together with the economy but increases in SF have outpaces almost every other city. This has been going on for decades and hard to see on your chart as differences in price changes are compounded up over the years. 50 years ago prices were much closer together today they are far apart:

Avg $/ Today (Trulia) SF $854 LA $478 SD $355

This doesn't address the larger region, though. Some of the development on the outskirts of San Diego counts as San Diego, whereas anything outside the 7x7 grid of San Francisco wouldn't show up in the numbers.

Take some of San Diego's more historic neighborhoods that were build a long time ago, and track the home value. For instance, how much has a 4 bedroom 3 bath spanish style house build in the 1920s near La Jolla Cove (or in Mission Hills, if you want to keep it in SD proper) changed in value? That would be a better basis of comparison to SF.

I agree that without getting into the details you can be misled. "Cities" are defined many ways: city, county (same as city in SF but not in LA or SD), metropolitan division, metropolitan statistical area and combined metropolitan statistical area depending on your data source. Frankly it is a big mess and often you are not told which definition is being used. Not only that the definitions change over time! I had to deal with this data for many years - not simple at all.

Which one is most appropriate depends on your goal. La Jolla or Mission Hills are probably a lot more like SF than the SD MSA so likely perform more like SF but will still be tied to SD.

Unfortunately sales only occur infrequently and tend to dry up completely in recessions. This along with lack of data as well as different definitions make tracking detailed property types like 4br 3ba Spanish in La Jolla difficult and unreliable if not impossible. And in SF (city & county) that property type is very rare (also SF does not publish style data like some area - I think SD might). Best you can usuallydo is by bedrooms in a zip but only if the market is pretty active.

My original point was a simple one: even though real estate moves together across the country with the business cycle over time area can still diverge significantly. This has happened in SF vs LA/SD and in California as a whole vs the rest of the US. To see this look at the index levels over longer periods. Maybe go with a big areas like MSA/CMSA so you have lots of data and get both mature inner city and fringe suburbs - this is what Case-Shiller public indexes are like.

That's a good point, though it could just indicate that the nimby delta between the regions remained constant over time.

Why blanket punish and make every single development on the waterfront more expensive because of a single Warriors arena project that was eventually moved to Mission Bay?

All of these little costs, process hurdles add up and make housing more expensive. The broad point is that these citizen anti-growth initiatives, which might have a single poorly-designed and consulted project in mind, end up having very long-term and consequential impacts on housing prices across the board.

This 2014 study examined 7,300 land parcels in the Bay Area and found that if you increase the number of independent reviews for a construction project by one standard deviation, average land prices increase by about eight percent.

http://blogs.lse.ac.uk/usappblog/2014/07/01/regulatory-const...

I agree and am concerned about how the point of the economic cycle we're in affects the profile, goals and objectives of people we attract to Silicon Valley. You tend to get more true believers at the low points in the cycle versus the gold-rush folk we're seeing now.

What do you think is the best way of dealing with this? We can either build a lot more housing or drive away jobs and companies if we think they're too greed or speculation-driven.

"Why blanket punish and make every single development on the waterfront more expensive because of a single Warriors arena project that was eventually moved to Mission Bay?"

It's a long and detailed backstory, but the executive summary is that you've got a group of lawmakers who were inclined to rubber-stamp the sweetheart deal, so you can't just write a law that allows them discretion on the outcome. The arena plan required a zoning variance that was being granted for this particular project, and so the initiative targeted the exception-granting process for zoning. It was as specific as possible to the arena project, while still being effective and legal.

In any case, it's still possible to build housing on the waterfront -- it's just not possible to get zoning exceptions without public review. I think that's probably a good thing.

Still possible, but you have to run an entire political marketing campaign, complete with mailers, etc. Furthermore, with a ballot-box planning process, developers are going to bypass the typical considerations that the city's professional planning staff usually asks for in favor of whatever they think is broadly marketable to a voting public.

The cost of these additional processes adds up. Urban containment and growth control are not free. In many cases, these policies do legitimately protect a certain quality of life, but they are also effectively a tax on newcomers and prospective residents.

California home prices started deviating from national norms around the mid-1970s after individual communities and the state supreme court started enacting growth control policies. It created a system that is so politically unpredictable that we're simply not able to produce enough housing to keep up with population growth at a time when the country is re-urbanizing.

"Still possible, but you have to run an entire political marketing campaign, complete with mailers, etc."

...to get an exception to zoning rules that have been around for decades. Want to build within the established rules? No election required.

Let's not confuse this with something truly ridiculous, like the statewide proposition that capped property taxes at their 1970s levels. I'm not arguing that every citizen initiative is a good idea.

Yeah, but those zoning rules like the one affecting Pier 70 are their own products of bizarre, political, anti-development NIMBY-ist quirks.

I believe some of the buildings on the pier are actually 92 feet high from the pre-war period, but some good, old downzoning in the 1970s moved it to the forty-feet level like much of the city.

Agreed on Prop. 13. Nightmare. Totally messed up municipal and public school finance for decades.

Sucks that even though the SF city budget is nearly $2 billion larger annually than it was in 2011, we can't seem to divert more funds to teachers because of how convoluted the school financing formula has become post-Prop. 13.

The effect of Prop 13 is much, much more than this. It gives homeowners an incentive to hold on to property as long as possible.

The article mentioned "this uninhabitable home possibly infested by rodents and held up by a couple of poles" selling for $1.8M, but neither that or the linked one mentioned the owner was paying tax on only $70k of assessed value.

There are often comparisons made to Texas-- in this case, someone owning a $1.8M house would be taxed around $54,000 a year in Texas, versus the $700 he was paying in property taxes in California.

This isn't public review, it's a public vote. A vote is a vastly different barrier to entry than review. One of the biggest complaints I have about the west coast--and, yes, I'm a transplant so I bring my own ideas to the party--is this obsession that everything should be put to a vote. The initiative process is broken in this regard because it increases that expectation.

Public officials, especially elected ones, are supposed to have discretion. That's why we elect them. If they screw up, we vote out the people responsible, not erect more set-in-amber barriers to doing things in the future.

Yeah, well...you're sort of grinding your axe on the wrong stone, here. This law wasn't passed because people believe "everything should be put to a vote" -- it was passed because a lot of people were (IMO rightfully) pissed that their elected representatives were essentially giving away public land to the wealthy. It's a story as old as politicians.

I wish there was another way to block that sort of thing that didn't require citizen initiative. But if it comes down to passing an initiative that requires populist approval to violate existing laws or shrugging and walking away because we can't vote the bastards out until after there's an arena on the waterfront...well, I'm glad we have initiatives for that. I don't generally like the outcome of direct democracy, but this is a case where the initiative process worked exactly the way it was supposed to.

But if something violates the law isn't that why we have courts instead of passing something that will continue on for the next few decades?

The law allows an (IIRC unelected) review board to grant zoning variances. What happened here was that the review board was rubber stamping the exception because powerful local politicians wanted it to happen, because...well, money talks.

Essentially, the citizens passed an initiative that ensured that the existing zoning laws had some actual teeth, instead of just trusting politicians not to violate them with impunity.

Lets make a car analogy:

If you restrict a Japanese car seller to only export 10k cars to the USA, that car seller will inevitably export 10k luxury cars. The reason why they do this is because the demand for luxury cars wont be exhausted by such small numbers. Once they can sell unrestricted, they will definitely go for the far more profitable median market cars, because they can sell far greater volume of them.

If you want to prevent gentrification, you would allow massive density increases. The middle class out buy the rich in aggregate.

This blog article gives a better overview of the concept: http://urbankchoze.blogspot.ca/2014/06/how-density-limits-br...

It's a bad analogy. The car manufacturer's costs go down with scale, making low-margin, high-volume production an achievable business model. Real estate development costs don't really have economies of scale -- it costs a lot more to build skyscrapers, both in terms of construction costs, and in terms of land (rezone a parcel to increase height limits, and the cost of the land goes up to match the new use).

Said another way: unlike cars, the fixed costs of real estate dominate the cost of the final product at all scales of "production".

It's not about that, it's about manufacturers going for the low hanging fruit first if they are restricted to selling a small limited amount. These manufactures in my example have already gotten the economies of scale by developing for their local market, so on a marginal basis, it doesn't apply in this metaphor.

On a cost basis, those unit construction costs are around $200k for a 3 bedroom 'family' condo vs. the $1 million that a condo would currently cost today in the SF bay area. Big difference and actually affordable for a $70k/yr annual income vs the $335k/yr income required for a $1million dollar condo.

>Honestly, I think it's more ridiculous to look at San Francisco and claim that the problem is that we aren't building enough, when you can walk up to just about any live/work space in SOMA, and see the tenant list is mostly startups. That's what happens when you let developers build whatever they want -- they build for the most lucrative allowed use of the land. And that usually isn't residential construction.

So why aren't the developers building taller commercial buildings? Startups are lucrative, right? So why don't the developers just build twice as high and sell twice as much floorspace for twice the revenue? They're free to build whatever they want, right?

Can't do that. Proposition M, passed in the mid-1980s, caps the amount of office space that can be built in a given time period. We're right up against the cap at the moment.

Prop M doesn't impact the stuff I'm talking about, which is (nominally) residential construction being used exclusively for business use.

The prevalence of this kind of "live/work" space in SOMA is an artifact of the "building up" that happened the last time there was a technology bubble. We can see how well that worked out: a lot of people were evicted from older construction, only to have it replaced with more expensive new construction that is mostly being used for business purposes, because no actual human beings can afford it.

You got your history wrong. Few if any people were evicted to build live/work units in SF. Live/work units were build exclusively in areas zoned industrial (i.e. old factories and warehouses) - not apartments[1]. In fact it is illegal NOT to run always be running a business in a live/work unit[2].

Most live/work building's rules will require that you maintain a business license. Although most live/works are used primarily if not exclusively for housing the city does not seem to care as long as they get their license fees.

Did you just make up you "facts" to support you ideology? Give the reverse a try someday. ;)

[1] http://www.sfgate.com/bayarea/article/How-S-F-s-live-work-de...

[2] http://www.sfgate.com/bayarea/article/Fees-considered-for-S-...

Well...here's a fact: I live in the neighborhood, in one of those residential units that you're saying didn't exist before the 1990s. It was built in the early 1900s. There's always been residential space in SOMA, and yes, a lot of it got knocked down to build these lofts. The live/work zoning changes were to allow rezoning of industrial spaces, but that doesn't mean that SOMA was exclusively industrial.

I don't know if "most" live/work units require a "business license", but I know that they weren't intended to be office buildings -- which is what you seem to be asserting. They were the "solution" to artists being pushed out of the city during the last major boom. And it backfired.

Nobody said SOMA didn't have residential property. It is a patchwork of different uses and zonings.

But you are simply* wrong that housing was destroyed or people were evicted to build live/work. As you now admit it was only built on industrial property. It is against the law to live in industrial properties - it simply not safe. However it is possible that people living illegally in industial space were evicted.

You stated that "a lot of people were evicted" to build live/work. Can you document even one example.

C'mon timr! You are letting you opinions corrupt your understanding of the facts. The world is just not so simple that everything will conform to preconceived beliefs. You need to actually check the facts not just make them up. Just admit you were wrong, move on and try not to do it again.

*-typo: simple->simply Thanks timr!

I didn't say that live/work lofts were created from industrial space. I said I live in an older, non-industrial property in SOMA, and that there are/were many examples of same. And while the live/work legislation was a compromise to allow rezoning of industrial space, that is not the same thing as saying that live/work lofts replaced only industrial spaces. That's not true.

Two seconds of google:

http://www.sfgate.com/news/article/PAGE-ONE-Loft-War-Raging-...

"At Shift Media Inc., a small but prosperous firm on Bryant Street in the Mission, half a dozen employees work in a high-tech bunker developing Web sites for some of the nation's biggest companies. Another 20 businesses with 50 more workers share the building....Late last year, a new owner bought all the buildings on the block. The tenants in one were evicted so that it could be converted to lofts."

My point is -- and always was -- that the "build up" mantra was heeded in the late 90s, and developers used the new leniency not to build housing for artists and low-income people, but to build offices and luxury housing. This will happen again.

As explained live/work was only built on non-residential land - residential units were created and none were destroyed. This is good for housing and only bad for industrial users no longer welcome in SF anyway.

You link does not support your claims. Shift Media is a business (ironically web dev) who lost their lease and moved - nobody lived there. The artist mentioned - who actually did lose her home - was living illegally in a warehouse. So unless you against enforcing zoning - not sure what we can do.

Live/work has been good for housing but way to small to have have an impact. Although I agree it did not live up to it's pro-artist hype. This was do to poor drafting (possibly intentionally or possibly just impossible - try defining "artist") by the SF BoS. Developers just followed the rules which were then changed a few years later. Similar thing happened in NYC at least twice (e.g. AIR in SOHO.

Today it is pretty much impossible for developers to build housing for low income people in SF without heavy subsidies. Land is just to expensive and building costs too high. Only huge easing of development regulations to make more buildable land available and costs lower would make a difference but you are against this as are most people in SF. So we should expect more of the same and the slow and steady gentrification will continue - it is totally predictable.

"As explained live/work was only built on non-residential land - residential units were created and none were destroyed."

No. You're wrong. The quote explicitly says that the developer bought out a whole block, and kicked people out of private residences, in addition to converting warehouses. This was not the only occasion where that happened.

We are just going around in circles timr. The Cronicle article (as usual) is pretty poorly written so it's not clear who was evicted. Given the regulation at the time concerning demolition, rent control and live/work I am confident no housing was destroyed and no legal residential tenants were evicted. To say the article "explicitly" says this is wishful reading. Oh well. We disagree about a fact.

One last link - here's the planning dept report on the original 1988 live/work law. Fits what I remember hearing about it's origins in the mid-1990s. Shows the difficulty we have getting the results we want even with the power to make the rules and tons of resources. I'm not optimistic.

https://archive.org/details/citywidelivework19sanf

So why doesn't the initiative say that? Why run a vote on requiring votes on all waterfront development height changes?

Another interesting article from Kim-Mai Cutler on the absolutely fascinating Bay Area housing market. In case you missed her last one and the discussion in HN:

https://news.ycombinator.com/item?id=7590250

One correction is needed: tenancies in common (TICs) ARE NOT a method of avoiding SF rent control rules. It has absolutely no effect on whether or not a particular unit is subject to rent control. It is simply a way that people can share ownership of a multi-unit building - like a coop. On the other hand condo conversion does remove many of the burdens of the SF rent control. That in turn is why the SF government had to essentially outlaw condo conversions. The rules are very complex and constantly changing - educate yourself and then talk to a lawyer.

I'm aware of that, but unfortunately, a lot of real estate interests use TICs and the state Ellis Act to kick out long-term rent-controlled tenants.

Well technically it is only the Ellis Act that makes eviction easier. TICs just happen to be the best exit for a building that has been "Ellis Acted" and therefore cannot be rented for several years. All the units still remain subject to all the rent control rules if they are ever rented again - plus a whole bunch of other rules meant to discourage the practice. Again TICs are just the way multiple people own a single real estate.

BTW - TICs have an unusual meaning in SF. In most (English law) places it simply means property held "as undivided partial interests" - say 50/50 by two owners. In SF it means not merely this but also that all the owners have an agreement between them about who live where, etc - much like a coop agreement. It is sort of a condo-lite created in response to the restrictions on condo conversion - part of the endless war that is rent control (that only reliably benefits lawyers and politicians who are usually lawyers too). Again - complex stuff - see a lawyer. ;)

The problems mentioned in the article certainly are not unique to SF, though the scale is pretty large.

Sidney, MT, which is in the Bakken oilfield, has such a shortage of housing that workers there spent last winter sleeping in campers and trucks on the side of the road. In the winter, the temperature can dip to -30 degrees. The dept of transportation (DOT) bottled up a housing projected for almost a year over a right of way dispute. In this case the developer agreed to pay for the improvements, but the DOT insisted on overseeing the process, which increased the cost 2x.

In my experience:

1. Homeowners fear change because they usually like their neighborhood, have most of their assets "at stake", and envision worst case scenarios.

2. Too many elected officials categorize themselves into a soundbite. They don't just campaign by the soundbite, but they govern by it. Project details and reality be damned, I'm pro-parks!

3. Top municipal employees almost always have too much power. When a new elected official comes in, they listen to his/her goals and then put new processes in place, while seldom removing old processes. This adds unreasonable amounts of time, complexity and cost to projects.

The first and second problem can frequently be worked out but the third problem is crippling. If you want to fix the housing crisis, start there.

Just moved to SF (with two kids so renting a 3br was a required expense).

Why aren't the big tech and VC firms spending a lot more on lobbying, redevelopment, etc?

Though I'm the beneficiary of the rapidly increasing salaries, some relief on the housing side would remove a lot of the pressure for wage increases. A lot of really talented engineers won't even bother taking interviews for bay area jobs due to the housing situation. It seems a bit unsustainable to me.

Can I ask where you send your children to school in central SF? I heard bad things about SF state schools - is that true? Are there better private schools as well?

"Fix it, but, uh, not until I leave."

As a homeowner in the Bay Area, my politics are: "Let's fix it!" But with as much equity as I've got pulling in the other direction, it is damn hard to toe that line.

I wrote the article, and I'm personally concerned that housing prices affect the mix and balance of companies in the local tech ecosystem in favor of the big corporations like FB, Google, Apple and heavily venture-backed startups. It's bootstrapped and smaller companies that hurt in this situation because they can't afford to pay the salaries that cover the living costs here.

If the bootstrapped companies can't afford to be here, they end up starting in some other city far away and growing into a significant presence there. That's probably good for those communities, but not necessarily good for the long-term health of the Valley if our ecosystem ends up being too dependent on two or three mega-corporations.

If you look at Palo Alto, it's a microcosm of what could happen to the entire region. That city has basically starved itself of young companies because it's not growing housing or office capacity. And with foreign purchases of 1950s era ranch homes there, I'm mildly concerned that Palo Alto will turn into our regional equivalent of the Park Avenue stash pad or the Kensington ghost mansion for Chinese that are escaping a poorly performing domestic real estate market and Xi Jinping's unprecedented crackdown on domestic corruption. Perhaps that's good for property prices, but it's terrible for having a living, breathing, dynamic community.

It's bad for bootstrapped startup, but startups who decide to raise funds can still do fine.

Anyway that's always been Silicon Valley's strength: VC money. If you want to start a bootstrapped startup, Silicon Valley is a bad place to start with. You're in competition with so many cool companies for recruiting, while in a big enough city with a university you can easily be one of the sexiest company to work for and attract the talented workers who don't want to move to California.

Right now, the way that tech companies get around this is by paying their employees progressively more and not really engaging with the political system.

But this particular strategy also has its downsides from a community perspective, because it starves out other uses of our city for public service workers, teachers, artists, etc.

Perhaps there is another way where we are politically engaged, where we can generate broad political will for more housing given that the largest and most successful companies have a hand in funding or supporting diverse growth (in the way that New York's biggest corporate institutions are also great patrons of the city's arts).

Many of the foreign-owned houses are actually bought by corrupt Chinese officials and business men planning their exit from a country that will probably eventually execute them if they stay.

The corruption crackdown forces the money out precisely because the time of reckoning draws nearer, while many more honest Chinese also see overseas markets as a value compared to over inflated domestic markets. Actually, if housing gets cheaper here in China (which it should), you'll see more activity here and less activity abroad for the same reason.

Good point-- one of the assumptions of increasing supply is that the demand will remain roughly the same. The demand curve may be so steep that even large increases in supply will be bought up and not lower prices much.

> If the bootstrapped companies can't afford to be here, they end up starting in some other city far away and growing into a significant presence there.

I would love to hear of examples of this. I cannot think of any at all.

Building cheaper moderately-high-density housing doesn't really compete with single-family detached houses; it competes with housing further from the core. In fact, with higher general density, you'd expect your lot to become more valuable, since it can now potentially be sold to developers. There's also the knock-on effects of higher economic growth and shorter commute times on property values and available amenities, and broadening the tax base, potentially reducing your tax burden.

If you tore down all the skyscrapers in Manhattan, your brownstone wouldn't get more valuable; rather the opposite.

It is interesting how people's intuition guides them to totally wrong conclusions in this matter.

I think what you said is absolutely correct, but I also think that a lot of people still have the opposite opinion based on their intuition.

Huh. That makes me feel better about planning to vote no on M. Thanks.

The danger is that the bubble will burst and that you'll lose all of that equity on its own unpredictable timeline.

I can't find any reason to be optimistic after reading this article.

Is there any reason to even consider moving to the Bay Area after graduating? It seems like any other city would be more manageable.

You only read bad news; the reason to move here is because the bay is the hub of the both entrepreneurship and tech in the US. Having said that, rent is expensive but salaries are more or less commensurate.

No, no they are not.*

Several times in my career I have looked at moving to SF, and when it's gotten to the point of talking about salary and upscaling that to what I made at the time, that's not true.

The numbers discussed were about 20% more, but that did not cover the huge delta in housing costs.

It is true that you will spend proportionally more on housing here. It is also most likely true that your total savings will be higher here. EG, you could save 50K$/year in the valley whereas you could only save 20k$ a year working in Iowa. The 20K is much larger compared to the cost of living, but you will be better off when you retire if you squirreled away the 50K$. If you want to move to Iowa at that point, all the better, you can now afford a palace. This assumes you can incur the cost of moving and can stay employed.

And if one purchases a property, they are on the receiving end of massive home price appreciation-- housing becomes an investment rather than an expense.

Were you looking at google & co or a startup? Usually your bonus & stock compensation is around %40 of your total compensation. Startup stock is non-liquid, and therefore unusable.

IMO, Bay Area shouldn't get special consideration from you.

If you really like the work, then, yeah, go for it. But don't choose a crappy job there just because startups.

Edit: it's well worth investigating specific domains that don't get as much airtime on HN. They're probably more technically interesting and demanding, which is what you want from a first job. Ultimately, I can't imagine a technologist finding long-term happiness in pop-tech culture.

"whargaaarbl startups whargaaarblr"

No, there's no reason. You can find a good paying, interesting job elsewhere. Life is not all about the newest Instagram for Pets (iPhone 6 only)

I might feel bad for people dealing with housing in SF.. But I live in Auckland. Considering moving back to Texas so I can feel sorry for people dealing with both cities' housing.

Most aren't familiar so I'll paint a picture(in NZD). The average selling price for a home just this past September was 683,101. What will 683k get you? Pretty much a shack by US standards. Probably no insulation. No central AC. It's actually pretty hard to describe just how little you get. Sure, you can buy lower but even at 550k homes come with descriptive words like "Real potential", "A real do-up", "Great starting point", "Fringe", "A foot on the ladder". Oh, and did I mention the 20% DP you need for a mortgage now? And the interest rates will have you paying double unless you pay it off fast. Meanwhile, median household income is about 60K(USD).

Renting? Anything under 400/week will most likely be unsuitable for a couple. You really don't start hitting "descent" until you're closing in on 500/week and they come with more bedrooms than you need.. Almost no good one bedrooms. There is this threshold you have to cross before you start finding places that have been kept up. See, there is a tremendous housing shortage. This causes much of the low end stuff to go barely maintained through decades of renter churn because they are sure to find another renter regardless. You might search months for a suitable place to rent, and then have to contend with many others after the same place. Often between the time a listing goes up and you can call, same day, it's mysteriously gone. A lot of the choice places don't schedule appointments; they herd groups of 20 through at designated times on viewing days. The property management agents, which you'll most likely be dealing with because you're renting a property from some guys portfolio of like 5(corporate owned apartment complexes are almost unheard of), are often times very unhelpful and even rude.

A lot of the points about renting are mirrored in buying. Most homes go to auction because the shortage. People get desperate and end up bidding high to secure a place and be done with the process.

In the US people absolutely hate packing and moving. In Auckland simply finding a suitable place to live is so bad, you don't really pay any mind to the actual moving:|

End Rant.

Stockton is bankrupt. Go build and live there for 20% of the price, you can still come to SF for meeting VCs. Or somewhere across the bay.

"Oh but they don't have my favourite vegan frozen yogurt there, and in Starbucks all I see is PCs" grow up.

They think of themselves as the most innovative people of this generation and use the internet yet they can't manage to have their team 10mi from where they think it should be. Pathetic.

I'm not really familiar with the Bay Area, only been there a few times for work. That said, it looks like Stockton is a bit farther from SF than your post would indicate... And I'm only guessing that a commute in and out of SF daily would be about 3-4 hours of time (just from what I'd seen going to/from the airport into the SOMA area)... I may be mistaken here.

I've spent enough of my life commuting.. I do best with about a half hour commute, which gives me warm up/down time for my day... I really don't want to have a 12-13hour day from when I leave home, and get back.

All of that said, I don't get why there is such a focus on bringing people into the Bay area... It would likely be easier and cost less to relocate the Yahoo guys and build-up further in, or hell, Atlanta or Phoenix. The company could spend the savings on building up the community they move into, probably get great tax incentives, and the employees would bank a lot of cash on the relocation. New hires would come in to more closely match the local economy even.

Phoenix, for example, has pretty decent internet... an okay cultural scene, some great food (okay, not as good with seafood), and already has some very large companies doing software development here (American Express, Paypal, Wells Fargo, Go Daddy...) with a lower cost of living. Yes, summers can seem like hell on earth, but there are lots of places within an hour or so that aren't.

Okay... done ranting...

"That said, it looks like Stockton is a bit farther from SF than your post would indicate... And I'm only guessing that a commute in and out of SF daily would be about 3-4 hours of time"

You're right. But what I'm suggesting is: Don't commute there.

Get your team there. If someone is already living on SF, great, they can stay there and do meeting through Skype/Hangout.

If they're moving there, they can live close to the company cheaply.

And if someone needs to do a meeting on SF, going there once/twice a week is not too bad.

You forgot the social network effects. Your socially isolated from the developer community in Stockton. Most people I know who have moved from Stockton are far happier in the bay area than Stockton itself. You have no real future living there, and anybody who has potential has long moved out. Live at close to the martinez bart station if you really want to move out.

Yes, this is an important issue.

If I lived there I would certainly be more happy living in SF than in some city further away.

My idea is more in the sense of not cramming every new company there. So yeah, maybe you would be alone at first, but convince more people to go there, attracted by the cheap cost of living and maybe SF can get less cramped (and it's still close enough to go once a week, etc)

Of course this also takes some vision from the municipality, unfortunately the most common thing besides high rents is NIMBYism.

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